Infrastructure and Private Sector Investment in Pakistan

Abstract

The purpose of this paper is to assess the role played by infrastructure in Pakistan's economic expansion. Specifically, analysis is focused on the manner in which the expansion in various types of infrastructural facilities interact with private sector investment, and whether there is a long run equilibrium between infrastructure, private investment, and GDP. The main findings suggest that infrastructure's role in this model is not as straightforward as might appear at first. On one level, it appears that in the case of Pakistan the expansion of public infrastructure has played a rather passive role in the country's development. That is public facilities have largely expanded in response to the needs created by private sector investment in manufacturing, rather than strongly initiating private capital formation. However, from another perspective, because infrastructure has responded to tangible needs created by private sector expansion it has, no doubt, been very effective in alleviating real bottlenecks.